Strike Price: Complete Guide & Calculator

Master the fundamentals of strike prices in options trading and make informed investment decisions

What is Strike Price?

A strike price, also known as an exercise price, is the predetermined price at which an option contract can be exercised. It represents the price at which the underlying asset can be bought (for call options) or sold (for put options).

Key Components of Strike Price:

Call Options: The price at which the option holder can buy the underlying asset
Put Options: The price at which the option holder can sell the underlying asset

Types of Strike Prices

In-the-Money (ITM)

When the strike price makes the option have intrinsic value:

  • Call options: Strike price below market price
  • Put options: Strike price above market price

At-the-Money (ATM)

When the strike price equals or is very close to the current market price of the underlying asset.

Out-of-the-Money (OTM)

When the strike price makes the option have no intrinsic value:

  • Call options: Strike price above market price
  • Put options: Strike price below market price

Strike Price Calculator

Enter the current market price of the underlying asset
Enter the strike price of the option
Select the option's expiration date
Moneyness: -
Price Difference: -
Days Until Expiration: -

Real-World Examples

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Frequently Asked Questions

How is strike price determined?

Strike prices are typically set by the options exchange at standardized intervals. These intervals vary based on the underlying asset's price and the exchange's rules. Common intervals include $2.50, $5, and $10 for stocks priced differently.

What affects option premium relative to strike price?

The option premium is affected by several factors in relation to the strike price:

  • Distance between current market price and strike price
  • Time until expiration
  • Volatility of the underlying asset
  • Interest rates
  • Dividends (if applicable)
How do I choose the right strike price?

Selecting the appropriate strike price depends on your trading strategy and risk tolerance. Consider these factors:

  • Investment objective (income, speculation, hedging)
  • Risk tolerance
  • Premium cost
  • Time horizon
  • Market outlook

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